Implement JOBS Act crowdfunding rule now

Here's a sobering fact: Since 2008 the number of U.S. businesses closing each year has outpaced the number of businesses being created. That hasn't happened, even during a recession — in the past 30 years.

This is bad news for the economy and for workers, as fast-growing new firms contribute disproportionately to new job creation. Yet the number of high-growth firms — firms that increase employment by 20 percent a year for at least three consecutive years — as a percent of all firms dropped to 2 percent in 2012 from 3.1 percent in 1997.

Creating a successful new business, especially a high-growth business, requires a good idea, tremendous amounts of hard work, and capital. Ensuring that new start-ups have access to capital was the motivating factor behind the Jumpstart Our Business Startups (JOBS) Act. Enacted in 2012 with overwhelming bipartisan support, the JOBS Act sought to reduce the regulatory burden on emerging growth companies, make it easier for companies to launch their initial public offering (IPO), attract accredited and non-accredited investors, and ultimately utilize crowdfunding.

Three years after the law was signed by President Obama, the Securities and Exchange Commission (SEC) is still working on some of the rules to implement the law. One of the last remaining pieces is the rule to implement crowdfunding. The SEC now says it expects to issue a final rule in October. If it delivers then, the rule will come out approximately 1,000 days after the deadline set by Congress in the JOBS Act.

It is impossible to say how many companies over the past two-and-a-half years have withered without access to capital over that time.

What we do know is that the provisions of the JOBS Act that have been fully implemented are contributing to economic growth and job creation. Take for example the portion of the JOBS Act dealing with IPOs by emerging growth companies. The JOBS Act made it easier for these companies to talk to investors before going public, file initial IPOs confidentially, and reduced some of the regulatory burdens associated with going public. To date, over 500 companies have gone public under the emerging growth provisions of the JOBS Act.

Moelis & Company, where I now serve as vice-chairman, was one of those companies that went public in 2014. Since then, the business has grown, and, as a result, employment with the firm has grown as well. Our number of managing directors is up over 15 percent since the IPO.

There are many other companies that could tell a similar story. Earlier this year, a study by the Wall Street Journal revealed that the 454 companies that had gone public under the provisions of the JOBS Act created approximately 82,000 new jobs. The number of employees for these companies was up roughly 30 percent from their pre-IPO head count. By comparison, from the time of enactment of the JOBS Act to the time the study was undertaken, overall private-sector employment was up only 6.6 percent. To be fair, some of these companies would have gone public and would have created new jobs — even without the JOBS Act. But the expedited IPO provisions made it easier for these companies to raise capital through a successful public offering.

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While it is long past time for the SEC to finalize the crowdfunding rules, there will still be more work to do. For example, studies point to the recent surge in banking regulations as contributing to the collapse of new bank start-ups. Fewer new banks mean less access to competitive capital for businesses and families.

Similarly, our patent laws, tax code, and business-formation rules all need reform. The bad news is that much remains to be done. The good news is that the JOBS Act is proof that we can in fact make progress in creating the type of environment that is necessary to support the entrepreneurs and start-ups we are all counting on to grow our economy.

Commentary by Eric Cantor, the former House majority leader, who served as the U.S. representative for Virginia's 7th congressional district from 2001 to 2014. He is currently vice chairman and managing director at Moelis and Co. Follow him on Twitter @EricCantor.

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